Monday, February 16, 2015

On February 5,
2015, a Division Bench of the Delhi High Court vacated
the interim injunction granted on January 19, 2015 by a Single Judge of the Court
against Glenmark Pharma in respect of Symed Labs’ process patents on Linezolid
IN213062 and IN213063.

The reason for
the ad interim vacation of the interim
injunction of the Single Judge, according to the Division Bench, was the
failure on the part of the Single Judge to take into account Glenmark’s
contention that Symed Labs had failed to establish that the products of the
parties were identical, which is a mandatory requirement under Section 104A of
the Patents Act, 1970. Extracted below are the relevant portions of the DB’s
order:

“According to Mr Chidambaram, a specific plea is taken
in the written statement and he has drawn our attention to certain paragraphs
thereof to show that the Linezolid API manufactured by the
appellants/defendants is different from that of the plaintiff/respondent.
Therefore, before the learned Single Judge could grant an injunction in favour
of the respondent/plaintiff, it was incumbent upon the learned Single Judge to,
prima facie, come to a conclusion that the Linezolid API manufactured by the
plaintiff using its patented processes was identical to the Linezolid API
manufactured by the defendants/appellants. This does not appear to have been
done. It is in these circumstances that we are vacating the interim order for
the time being and direct that the defendants/appellants shall maintain
accounts and shall file the same in this Court as also supply a copy to the
respondent/plaintiff”

Section 104A
envisages reversal of burden of proof on the defendant in limited circumstances
where the patentee is unable to establish that the defendant’s process is
identical to that of the former’s patented process, but has established the
limited fact that products of both parties are identical. In the facts of
Linezolid case, unless the patentee sought to place reliance on Section 104A to
seek reversal of burden of proof, I am not sure it is incumbent on it to establish
the identicality of the products. Since I haven’t had the chance to read the
Single Judge’s order of injunction, I shall reserve my comments on the issue.

That being said,
the vacation of the interim injunction by the DB is only ad interim since it is yet to dispose the appeal. The next date in
the appeal April 6, 2015.

Sunday, January 11, 2015

On December 31, 2014, in a 30-page decision the Delhi branch of the
Indian Patent Office set aside its order of grant of patent IN234555 to Abbott
on its blockbuster arthritis drug Adalimumab (trade name “Humira”). The patent
was revoked on grounds of lack of inventive step and insufficient disclosure.

The facts of the case make for interesting reading. The Patent Office
granted the patent to Abbott on June 8, 2009, oblivious to the pendency of a
pre-grant opposition filed by Glenmark in September 2008. When Glenmark brought
this to the Controller’s attention, the letter intimating Abbott of the grant
of the patent was cancelled, this time without hearing Abbott. Naturally, this
peremptory decision was challenged by Abbott in a writ petition before the High
Court of Delhi, wherein the Court
directed the Controller to review the decision of grant by treating
Glenmark’s challenge as a review petition under Section 77(f) of the Act. It is
in this review petition that the decision of grant of the patent was set aside
on December 31, 2014. That’s quite a way to start the New Year for both the
parties concerned.

The Controller’s observations and findings start in Para 9 on Page 15 of
the Order. Before dealing with the grounds of review, the Controller undertook
a discussion on the subject-matter of the claims of the patent taking into
account the amendment of claims undertaken by Abbott during the prosecution of
the patent. Subsequently, the Controller rejected the contentions
of Glenmark with respect to lack of novelty including the ground of prior
claiming and ineligibility of subject-matter under Section 3(e) of the Act. However,
the contentions relating to lack of inventive step and insufficient disclosure
were accepted.

I will discuss the specifics of
these findings in detail in a later post, but what is to be noted is that this
decision again proves the need for and efficacy of the pre-grant opposition
mechanism which is effectively the reason for the outcome in this case.
Importantly, this also highlights the need to improve the procedure of examination
of patent applications since examination, and not pre-grant opposition, is the
first line of scrutiny. Therefore, it would help if details of examination of a
patent including the search and analysis carried out by the Patent Office are
captured clearly during its prosecution and are also available to the public,
instead of the confidential treatment it receives now. After all, what is so
confidential about the steps taken the examiner of a patent application to
evaluate the patentability of the subject-matter?

Let’s hope these issues receive
the attention that are due to them. Until then, we will have to repose faith in
the opposition and revocation mechanisms.

I thank a good friend of mine for sharing a copy of the decision with me! The link to the Controller's decisions on the official website of the Indian Patent Office is as usual playing truant (even at the time of publication of this post).

In a 143-page
judgment pronounced on January 9, 2015, Justice Manmohan Singh of the Delhi
High Court granted an injunction in favour of Novartis enforcing its patent
222346 on the bronchodilator drug Indacaterol against Cipla. Extracted below
are the observations of the Court on the options available to it and operative portions from the decision (In the next post, I will present
my analysis of the decision):

“121. Let me therefore ascertain
as to what tools are available on record in order to enable to perform this
duty of striking the balance between the parties. The said tools can be
discerned from the pleas raised by the parties and position which they have
taken the same can be summarized in the following manner:

a) Before starting of hearing in
the injunction application in the present case, the statement was made on
behalf of the plaintiffs that they are agreeable to license its patented
product to the defendant subject to the defendant’s agreeing that the plaintiff
would allow the defendant’s to import its product and work on profit sharing
basis. In response thereto, the defendant refuses to consider the said offer as
it is interested in conducting the manufacturing activities in India as according
to the defendant that the merely importation would still lead to monopoly
situation which is the ground of the tribunal to interdict for a compulsory license
under Section 83 and 84 of Patent Act and upon which I cannot prematurely
decide the same and perform the role of compulsory licensing tribunal at this stage
without fact finding and evaluation of evidence and correctness of the stand of
the parties.

b) The defendant on the other
hand suggested that the court can mould the relief in its written submissions
and also pleads that the court may fix up the royalty which can be ordered to
be deposited before the court subject to the trial of the present suit. I find
this approach again to be inequitable. This is due to the reason that in the
present case, the court is not proceeding to hold that there exists a credible
defence raising the grounds of the invalidity of the patent (though the
defendant has raised the said grounds but the same are neither explained
properly nor the same are relevant in view of the contra material on record and
are distinguished by the plaintiffs for which the defendant has not provided
any further answer) but is proceeding to observe on prima facie basis that
there exists a valid patent and the defendant could be provided a permission to
manufacture subject to payment of the royalty as an alternative to injunction
so that the inventor is rewarded. Thus, the alternative to injunction approach
for carrying out the activities which would otherwise be an infringement but
for the public interest cannot be misunderstood on presumptive basis that the
amounts are secured in the court subject to trial which means that the
defendant would continue to use the invention with the plaintiff getting
nothing until the trial of the suit gets concluded (without approaching the
appropriate forum which is compulsory licensing court) when prima facie case
has been made out for infringement and all other circumstances warrants the injunction.
That is the reason why, I cannot agree with the proposal of the defendant that
this court should permit the defendant to manufacture the patented product by
observing that the public interests warrants so without recompensing the
plaintiff realistically at this stage and merely seeking a deposit in the court
which would lead to all other generic companies would be taking the same route
without actually rewarding the inventor in practice. This approach was never contemplated
by the US courts nor was such jurisprudence ever intended to be laid down by
this court even.

c) The third tool which exists at
this stage in my hand is to fix up the royalty as an interim measure as to what
sort of the royalty would be reasonable and practicable so as to suitably
recompense the plaintiff as an inventor. In order to perform this task, I have
gone through the records of the case. There exists sale figures of the plaintiffs
and the defendant also states that it has sold 12148 unit of drug in the month
of October, 2014. I find that the said material again is not adequate in order
to understand the profit margin of the either side and further perform
calculation on the basis of the proximate loss or detriment to be caused to the
plaintiff in terms of financial loss or otherwise in order arrive at the figure
of reasonable royalty. Furthermore, the said fixation of the royalty by this
court on the monthly basis would be against the scheme of the Act when there exists
a mechanism under the Act to seek compulsory license and the domain of the
tribunal is prescribed under the Act. Thus, it would be neither wise nor it is justifiable
for me to comment on the sum of the royalty on per monthly basis or per annum
basis without analyzing the relevant material on record to be presented before
the court. I would say that in case the defendant was really interested in
paying the royalty on practicable rates without hiding anything from the court,
then the defendant ought to have proposed the concrete proposals to the court
and discussions could have been made by it in detail in the written submissions
as to what reasonable sum can be arrived at between the parties as an interim
royalty in lieu of the injunction."

Operative Portion

"130. The question to be asked at
this stage is whether there exists any such circumstance showing the extreme
demand of the patented product in question as per the material available on record
showing imminent need or dire straits reflecting the plaintiffs inability to
provide the medicine in question to the consumers except the concerns emerging
from articles which are noteworthy yet general in nature. I find that there is
no material on record suggesting the demand of the said patented product
outstripping the supplies on the basis of the public interest. Rather, there
exists a contra material on record wherein the plaintiff is stated to have a
surplus medicines available and agrees to further accelerate the supplies if
need be.

131. The main question in the
present case before Court is whether the Court will allow a party to infringe
the registered patent which is prima facie held to be valid, the infringement
is established and there is no credible defence raised by the other side. The
answer of this question is "NO". Under these circumstances, the Court
would never encourage the infringement in view of the exclusive and statutory
rights granted under section 48 of the Act. The effect of registered patent is
defined in the statute and the same is not capable of being misunderstood. The
statutory and monopoly rights cannot be reduced to a nullity as by virtue of
section 48 of the Act till the term of validity of the suit patents, the
plaintiff is entitled to prevent any third party who does not have its permission
from the act of making, using, offering for sale, selling or importing for
those purposes an infringing product in India. In the present case, the
compulsory licence has not been granted by the authority to the defendant. Even
its application for the same is not pending. Merely the grounds and conditions
stipulated under section 83 and 84 of the Act do not absolve the defendant to
infringe the registered patent.

132. Accordingly, in the facts and
circumstances of the present case, the following directions are passed in order
to balance the interest of the parties in the interim:

a) The defendant is restrained by
itself or through its directors, group company, associates, divisions, assigns
in business, licensees, franchisees, agents, distributors and dealers from
using, manufacturing, importing, selling, offering for sale, exporting,
directly or indirectly dealing in Active Pharmaceutical Ingredient (API),
pharmaceutical products, compound or formulation containing INDACATEROL,
specifically its Maleate salt, namely INDACATEROL Maleate alone or in
combination with any other compound or API or in any other form as may amount
to infringement of Indian Patent No.222346 of the Plaintiff No.1 until the determination
of the pleas raised by the defendant for seeking the compulsory licensing if so
filed shall be determined on merit and after hearing of parties in favour of
defendant, otherwise, it would continue during the pendency of the suit.

b) If such an application is
filed by the defendant, under those circumstances, the directions are issued to
the controller or to the relevant authority to decide the application for
seeking compulsory licensing within the period of six months from the date of
filing the application within two weeks from the pronouncement of the order.

c) The defendant is at the
liberty to move an application seeking modification/ vacation of the interim
injunction in case the application seeking compulsory licensing is decided by
the competent authority in its favour or the parties otherwise arrive at some
consensus on the licensing terms.

With these observations, the
application, being I.A. No.24863/2014, is disposed of. It is clarified that all
the findings arrived by this Court are tentative which shall have no bearing at
the final stage of the suit as well as at the time of deciding the application
for compulsory licence, if filed by the defendant.”

Thursday, January 8, 2015

Most students and practitioners of Competition law are aware that Section
4 of the Competition Act, 2002 deals with abuse of dominant position. Among the
various proscriptions in the provision, direct or indirect imposition of unfair
or discriminatory prices (including predatory prices) in purchase or sale of
goods or services by a dominant entity is deemed as abuse by the entity of its
market position under Section 4(2)(a) of the Act.

Of the three kinds of pricing referred to in the provision, predatory
price is defined in the explanation to the provision, whereas there is no
express guidance on what constitutes “discriminatory price” and “unfair price”.
Since the Act uses two distinct terms which are capable of being ascribed
independent meanings, they must be recognized as two different forms of abuse
by a dominant entity, which are also distinct in the consequences for the
victim of the abusive conduct.

Discriminatory pricing results in what the literature broadly calls
exclusionary abuse, whereas unfair pricing is understood to lead to
exploitative abuse. Between the two, what constitutes discriminatory pricing is
relatively easier to understand compared to unfair pricing, notwithstanding the
absence of definitions for both in the Act. It is the interpretation of unfair
price that poses the challenge of subjectivity, which in turn calls for
safeguards to prevent imputation of a meaning which was never intended by the
Legislature.

As stated earlier, the Act does not define “unfair price”. Section 2(z)
of the Act states that words and expressions used but not defined in this Act
and defined in the Companies Act, 1956 shall have the same meanings
respectively assigned to them in the latter statute. Neither the Companies Act,
1956 nor the Depositories Act, 1996 appears to define “unfair” or “unfair
price”. The definitions of “unfair trade practice” in the Consumer Protection
Act, 1986 or the erstwhile MRTP Act, 1969 too do not seem to be of help in
understanding the meaning of “unfair” from the perspective of pricing.

This requires us to look for interpretation of
provisions in foreign legislations which are in pari materia with the Indian provision. Article 102 of the Treaty
on Functioning of the European Union (TFEU) is similar in language to Section
4(2)(a) of the Competition Act. However, in the EU too, the body of case law on
exploitative abuse is significantly small compared to judicial guidance on
exclusionary abuse. The trend in the EU too perhaps may be attributed to the
reluctance of the European Commission to deal with an inherently subjective
enquiry such as exploitative abuse.

Whatever little case law exists appears to
interpret “unfair” as “excessive”. The
frequently cited case on unfair/excessive pricing in the EU is the decision of
the European Court of Justice in United
Brands Company v. Commission of the European Communities (C-27/76 [1978]), wherein the following test was laid
down:

“The
questions therefore to be determined are whether the differences between the
costs actually incurred and the price actually charged is excessive, and, if
the answer to this question is in the affirmative, whether a price has been
imposed which is either unfair in itself or when compared to competing
products.”

Of the two questions which need to be answered under the test, the first
calls for the establishment of absence of a correlation between the costs
actually incurred and the price charged by the seller for a good or service.
This would require the antitrust regulator to also assess the fairness of the
profit margin earned by the seller. The larger policy implication is that
dominant players could be expected to charge fairly, which obligation does not
apply to entities which are not dominant. Simply put, since a dominant player,
by definition, is one who can act independent of market forces, he is expected
to adhere to higher standards of conduct given the potential for abuse and the
consequences for consumers and market as a whole.

Having said this, the question that arises with respect to application
of the United Brands test is this- is the regulator expected to merely
establish the absence of a reasonable correlation between costs and selling
price to arrive at a finding of unfair pricing? Or is it expected of the
regulator to first arrive at what is fair before commenting on the unfairness
of the price? It is one’s opinion that in either approach, the seller cannot be
left in the dark as to what is truly fair in order for him to avoid being
hauled up a second time for unfair pricing. In other words, although an enquiry
on exploitative abuse requires the regulator to perform the role of a price
regulator, it could be said that the regulator may also be called upon to set
prices. That said, this is not merely an issue of policy, since a regulator who
is the creature of a statute cannot exercise powers which have not been vested
in him by the statute.

In the Indian context, this boils down to a simple question- whether the
Competition Commission has the power to set/fix prices, and not just comment on
its unfairness? To answer this, one must interpret Sections 27 and 28 of the
Competition Act which spell out the powers of the Commission to deal with abuse
of dominant position. Specifically, Section 27(d) empowers the Commission to
direct that agreements which are in contravention of Section 4 “shall stand modified to the extent and in
the manner as may be specified in the order by the Commission”. Section
27(g) is even broader since it permits the Commission to pass such orders or
issue such directions it may deem fit. Similarly, Section 28(2)(a) empowers the
Commission to vest property rights, which implicitly includes creation of
interest in favour of third parties by way of a license. The combined
interpretation of these provisions makes it abundantly clear that the
Commission has the necessary power to fix prices in a given case if the case so
warrants.

For instance, in a situation where the agreement relates to a patent
license between a patentee who is a dominant entity and another entity which is
the licensee, the royalty tariff demanded by the dominant patentee could be
accused of abuse under Section 4 for unfair/excessive pricing. In exercise of
its power under Sections 27(d),(g) and 28(2)(a) based on the language of the
provisions, it appears possible for the Commission to modify and spell out the
prospective royalty tariff. Simply stated, apart from finding the extant
royalty tariff unfair, the Commission has the express power to dictate the
future tariff.

This conclusion typically raises objections relating to the
ability/expertise of the Commission to set future commercial terms in highly
specialized agreements where domain/sectoral expertise is called for to
understand the commercial practicalities of the sector. But that objection is
not one of statutory power, it is one of the Commission having the
wherewithal/expertise to do justice to the nature of enquiry. Therefore, such
an objection cannot be used to argue that the Commission lacks statutory
authority to fix prices since it is the language of the Act that is decisive of
the issue. In any event, this is not an
insurmountable challenge since the Commission has the power to consult experts
in the relevant domain before it fixes future tariff in specialized contexts.

The long and short of it is that the Competition Commission has the power to enquire into exploitative
abuse by a dominant entity and also has broad express powers to fix prices,
where warranted.

Friday, January 2, 2015

The
fourth annual IP Teaching Workshop 2015 is being organized under the auspices
of National Academy of Law Teaching, National Law University Delhi, in
association with School of Law, University of Washington, Seattle, USA on 14th
and 15th February, 2015, at National Law University, Delhi.

In
2012, the first such workshop identified several broad challenges faced by teachers
of intellectual property law in India. In 2013 the workshop focus was on IP
teaching techniques, use of information and communications technology in IP teaching,
research and publication. The third workshop in 2014 discussed various issues on
IP clinics. All workshops have had key
speakers and resource persons from India and abroad. Now in its fourth year, by
bringing together a select gathering of IP teachers from all over India, the 2015
workshop will aim to focus on following agenda items:

Agenda

1.Teaching methods for advanced or
niche IP courses- This involves discussion on methods and techniques for
teaching specialised courses such as evidence in IP litigation, remedies, IP
and competition law & economics etc.

2.Empirical research in
intellectual property – This theme will deliberate on how IP law and policy can
be informed by empirical research and how law teachers and researchers can
contribute to such research.

3.IP clinics- It focuses on
contribution by the academia to law and policy - focus on how law teachers can
actively contribute to IP law and policy by working with the government,
interventions in judicial matters and by engaging with the civil society.

4.Teaching IP beyond law schools: Experiences from
technical, humanities and management schools - to include IP teachers in non-law
institutes and their experiences- discuss how law school teachers can
contribute and mutually benefit.

The latest
issue (Vol. 6, No.1) of Trade, Law
and Development, the bi-annual student-run journal of NLU Jodhpur, has been
published. The Journal has been ranked as the bestlawjournal in India in the past (2011-2013)andthe tenth bestlawjournal in the field of internationaltradeworldwide (in 2012 and 2013) by the WashingtonandLee UniversityLawLibrary in its annual rankings oflawjournals.

I thank Aabhas Kshetarpal, the Managing
Editor of the Journal, for sharing this development with me.

Thursday, January 1, 2015

Four years ago, on New Year’s Eve, I wrote aposton “generalizing” Intellectual Property Law. In the intervening period, particularly in the last two years, I have been blessed with ample opportunities to apply that sentiment to my work which has improved (I think) my understanding of IP Law and its practice. I have had multiple occasions to understand IP through the prism of Constitutional law, Criminal law and Competition law, and also go through the entire process of trials. The latter has strengthened my firm belief that a lawyer who banks solely on his knowledge of substantive law to deliver the goods is not even half a litigator because procedure will prove to be his Achilles’ heel.

Also, increasingly, I am of the opinion that although it might help to have a dedicated forum to deal with technology litigation, technology litigators must themselves not limit the scope of their practice and learning to their specialized areas. Regardless of what one chooses as her or his area of core competence, a litigator shouldn’t lose touch with fundamentals such as jurisprudence, Constitutional Law and Contracts. In fact, I’d go a step further to say that it is counter-productive, at least in Indian Courts, to project oneself as a specialist technology/IP litigator. Of course, the approach depends on what one wants to be seen as. If the objective is to have a larger appeal and be sought after as a counsel for multiple areas of the law, it helps to be a generalist with core competence in select areas, which is vastly different from exclusively practising niche subjects.

As I have said before, this is important because an internalized understanding of general areas of the law helps a litigator connect with non-specialist Courts which are seized with specialized subjects like IP. I have personally benefited as a litigator by employing this approach each time I have had to present the peculiarities of an IP statute before a Court, hence the conviction. Which is why it surprises me when I hear students of the law, who are yet to set foot in the profession and who wish to litigate, declare with absolute certainty in the first or second semester of law school that all they wish to study and focus on is IP or some other specialized subject.

It is certainly important to closely follow the evolution of jurisprudence in one’s chosen area, but it is equally important to connect it to the big picture because ultimately a litigator must be in a position to present to the Court the larger implications of specific arguments. And staying constantly in touch with general principles of the law helps present such arguments with greater effectiveness. Therefore, I think students would benefit immensely from paying attention to the fundamentals of general subjects instead of rushing through them. It would also help in the long run to having a basic understanding of economics and accounting.

This applies all the more to students of law who come from an engineering or pure sciences background. Although I don’t think law is meant to be taken up only by students from commerce or humanities streams (since I am engineer-turned-litigator myself), I do believe engineers and science grads in particular must invest more efforts in understanding the spirit of the law by systematically and rigorously examining theories of law and principles of common law. Engineers and science grads can certainly bring to the law skillsets and attitudes which are unique to them, but it is also imperative to “acclimatize” themselves to the dialectics of the law and its parlance.

When they do so, they will not only find greater acceptance in the fraternity, but will also perhaps be rightfully heard first on areas such as patent litigation given their training in technology. This also has a critical and positive consequence for the quality of discourse on patents. In the last few years, although the level of IP awareness has increased in India, the discussion on patents seems limited to broad and generalized propositions which may be attributed to lack of training in science, and negligible or no experience in the practice of the subject on the part of certain commentators. There are notable exceptions to this trend, but by and large the reluctance to deal with specifics probably stems from a clear paucity of training and experience.

I personally believe that the bar on academics from practising the law must also be held significantly responsible for this trend, which may not be peculiar to the patent discourse. As long as this bar remains in force, academics will be deprived of the opportunity of sharpening their perspectives through practice. Until such time this bar is lifted and even after, patent litigators with training or experience with technology must play a greater role in shaping the discourse on patents and in volunteering with realistic policy initiatives. This will hopefully bring about a more nuanced discussion on the subject. I must clarify that none of these suggestions are meant to claim an exclusive space for litigators with scientific training because there are patent practitioners whose lack of formal scientific training has not come in the way of professional brilliance.

With this, I wish everyone a Happy and Prosperous New year! May we learn more and be blessed with opportunities to apply what we learn!